Consumer Protection Regulation

Federal, state, and local consumer protection agencies all have a role in safeguarding consumers against fraud, deception, and unfair practices. But they need sufficient resources and authority to carry out their responsibilities. Consumers must be able to take part in making the laws that protect their rights and interests. They should also have the right to challenge violations of these laws. Consumer participation in administrative, legislative, and judicial processes is often valuable for these purposes.

The Federal Trade Commission (FTC) and the Department of Justice (DOJ) both enforce federal antitrust laws. These laws include prohibitions on unreasonable restraint of trade, price-fixing, bid-rigging, and mergers and acquisitions likely to lessen competition or create a monopoly. The FTC and DOJ also review proposed mergers and acquisitions to assess their effects on competition. As companies grow and merge, some industries have become particularly concentrated with only a small number of firms selling products or services. In some cases, this market concentration has resulted in higher prices and fewer alternatives for consumers. In recent decades, some policymakers have used the “consumer welfare” standard to argue that increased concentration is acceptable as long as prices remain low. But even with low prices for consumers, greater concentration may result in fewer suppliers, lower wages, and prevention of innovative companies entering the market. And in concentrated markets, firms have tremendous power to set the prices, terms, and conditions on their offerings.

The FTC has the authority to prohibit unfair and deceptive trade practices. It can also prevent unfair business practices that reduce competition, which can harm consumers. Such practices can increase prices, reduce quality, prevent accountability, or inhibit innovation. But enforcement has been inconsistent.

The FTC typically addresses these practices in several ways:

• by bringing cases in federal court seeking injunctions, redress, or both;
• by bringing administrative complaints seeking cease-and-desist orders; or
• through rulemaking at the direction of Congress. (In these cases, the statutes generally explicitly permit the use of streamlined notice-and-comment procedures.)

By contrast, if the FTC seeks to conduct a consumer protection rulemaking on its own initiative, it must comply with the much more complex and time-consuming procedures (sometimes referred to as “Magnuson-Moss Rulemaking”). The high cost and delay of such procedures may deter the FTC from utilizing its general rulemaking authority to prevent harm to older Americans’ health, safety, and economic security. Instead, the FTC typically addresses these harms on a case-by-case basis, even for abusive practices that could be more effectively ended through rulemaking.

In addition, state and local governments play an active role in protecting consumers. State laws on unfair and deceptive acts and practices are among the most effective tools in fighting consumer fraud and abuse. These statutes provide remedies for consumers, encourage merchants to resolve disputes fairly, and deter misconduct. State laws are similar to and complement federal laws in such areas as antitrust, unfair trade practices, and consumer health and safety. In many cases, state initiatives provide a model for needed improvements in federal regulation. Some local governments also employ tools to protect consumers, such as their licensing, taxing, or zoning authority. These tools allow local governments to provide oversight and respond to competition or consumer protection challenges on the ground. Local governments may also protect consumers through public education and outreach efforts.